Impact of the medicare prescription drug benefit on home- andcommunity- based services waiver programs

APRIL 2005
Impact of the Medicare PrescriptionDrug Benefit on Home- and Community-Based Services Waiver Programs C har le s J. M i l l i gan, J r. , J. D. , M . P. H .
C e nte r f or H ealth P rog ram D eve lop m e nt and M anag e m e nt U nive r sity of M ary land, Balti more C ounty ABSTRACT: “Dual eligibles” is the term for the 6.4 million low-income, elderly, and disabled Americans who are enrolled in both Medicare and Medicaid.With home- and Charles J. Milligan, Jr., J.D., M.P. H.
community-based services waivers allowed under Section 1915(c) of the Social Security Act, many of these individuals are able to live in a home or community set- ting, thereby avoiding institutionalization. Surveying Maryland’s 3,180 dual eligibles who are enrolled in home- and community-based waiver programs, the author finds that the end-of-2005 transfer of prescription drug coverage from Medicaid to Medicare under the Medicare Modernization Act of 2003 could put these beneficiaries in jeop- ardy. Maryland’s experience is likely to be typical of what other states will face. Theauthor recommends a number of federal policy remedies, among them allowing 90-dayprescriptions, using open or shared formularies, and lengthening the enrollment period.
The term “dual eligibles” refers to those low-income, elderly people anddisabled individuals who are enrolled in both Medicare and Medicaid. InJanuary 2006, responsibility for providing prescription drug coverage for thenation’s 6.4 million dual eligibles will transfer from Medicaid to Medicare, as stipulated by the Medicare Modernization Act of 2003. Those who are nursing-home-certified and participating in home- and community-based services (HCBS) waiver programs face particular challenges with the transi- tion to the new Medicare Part D prescription benefit.
This issue brief is based on a presentation at the October 2004 Invitational Summit for State Policymakers on Medicare Part D Implementation Issues, convened by AcademyHealth and the Rutgers Center for State Health Policy and sponsored in part by The Commonwealth Fund. HCBS waiver participants are receiving an percent of Medicaid beneficiaries were dual eligi- enriched Medicaid benefit package to help them bles, they accounted for 42 percent of Medicaid avoid institutionalization and remain in the commu- spending. Eighteen percent of Medicare benefici- nity. Participants typically receive a full complement aries were dual eligibles, with per capita spending of prescription drugs that, together with home- of $18,100, more than twice that for other maker services, case management, personal attendant Medicare beneficiaries. In 2002, 65 percent ($58 services, and other care, enable these individuals to billion) of Medicaid expenditures for dual eligibles function in a home or community setting. Without went for long-term care. Nationally, prescription thoughtful planning and the elimination of admin- drug spending for dual eligibles in 2002 totaled istrative barriers, the changeover to Medicare Part D $13 billion, or 14 percent of total Medicaid spend- poses risks for dual eligibles in HCBS waiver programs.
ing, while state per capita spending on prescribed This issue brief examines the likely impact of the new prescription drug benefit on HCBSdual eligibles in the state of Maryland as these individuals move from Medicaid to Medicare cov- erage. In Maryland, access to needed medications HCBS programs operate through waivers granted may be impeded, both in the short and long term; by the U.S. Department of Health and Human case managers are likely to be overburdened; and a Services under Section 1915(c) of the Social nonalignment of incentives across Medicaid and Security Act. Certain Medicaid requirements are Medicare may compromise the basic premise of waived under these programs to enable states to HCBS waiver programs—to enable very sick and provide a range of home-based services to individ- disabled people to remain in a community setting.
uals who might otherwise be institutionalized, The anticipated scenario in Maryland exemplifies while continuing to receive federal matching funds.
the challenges all states will face in making the To receive waiver approval, states must demon- transition to Medicare Part D a smooth one.
strate cost neutrality—that is, waiver program costsmust be no greater than the cost of institutional Dual Eligibles: Health Status and Spending care. States are required to limit the number of par- Of the nation’s 6.4 million dual eligibles, two-thirds ticipant “slots,” and they have the discretion to set are age 65 or older and one-third are nonelderly medical and financial eligibility criteria, cap spend- adults with disabilities. Dual eligibles tend to be ing, and limit availability to certain population sicker and more impoverished than other Medicare groups or geographic areas. In 2001, the most recent beneficiaries. Nationally, 71 percent of dual eligibles year for which aggregate data are available, 49 states live on annual incomes of $10,000 or less. Both were operating 231 HCBS waiver programs with elderly and nonelderly dual eligibles require more 843,000 participants.3 Of these, 94 waiver programs assistance with activities of daily living (ADLs).
served 489,000 aged and disabled participants.4 No Elderly dual eligibles report more chronic disease reliable national estimates are available for the and are more likely to be in a nursing facility.1 number of dual eligibles enrolled in HCBS pro- grams for the elderly and disabled. However, extrap- disabled and more often suffer from chronic and olating Maryland’s experience to the national debilitating health conditions, they consume pro- enrollment data that are available suggests that some portionately more medical care, prescription drugs, 425,000 HCBS participants are dual eligibles.
and support services. Combined Medicare andMedicaid spending on dual eligibles totaled $106 billion in 2000. In that same year, while only 16 In FY2004, 3,180 dual eligibles were enrolled intwo 1915(c) waiver programs in Maryland: I m pac t of th e M e di care P re sc ri p ti on D ru g B e ne f it on H om e - and C om munity - Base d S e rvi c e s Waive r P rog ram s Older Adults Waiver (OAW). Available to
Table 1. Dual Eligibles in Maryland’s HCBS low-income adults who are at least 50 years old and qualify for nursing facility level of care. In Enrollees
Eligibles
Maryland residents in FY2004. Ninety percent of participants were dual eligibles (Table 1). The benefit package includes case management, per- sonal care, home health care, personal emergency response systems, home-delivered meals, con- Source: UMBC analysis of Maryland Medicaid data.
sumer and family training, nutritionist services,home modifications, and assistive devices.
was prescribed for one-third of waiver participants.
Other drugs to lower blood pressure and high Living at Home: Maryland Community
Choices (LAH). Available to low-income peo-
cholesterol are frequently prescribed (Lisinopril, ple with disabilities between the ages of 21 and Norvasc, Lipitor), as are antibiotics (Cipro, Zithromax), 59 who qualify for nursing facility level of care.
Prevacid (for acid reflux disease), Zoloft (for LAH began in 2001 and enrolled 446 individu- depression), and Ambien (for sleep disorders).
als in FY2004. Sixty-three percent of partici- Overall, Maryland’s 3,180 dual-eligible pants were dual eligibles. Covered services are waiver participants received a total of 220,884 pre- similar to those for OAW, with the addition of scriptions in FY2004, for an average of almost 70 training and supervision of attendants, occupa- prescriptions per beneficiary. Seventy-one percent tional therapy, speech and language services, and of dual eligibles required four or more prescrip- disposable medical supplies not normally cov- tions per month, and almost 10 percent required 12 or more prescriptions per month (Figure 1).
Not only do these beneficiaries require a large number of prescriptions, but the formulary to meet their needs must include a wide range ofmedications. In FY2004, Maryland’s dually eligible Drug Formularies
waiver participants required and received 1,645 Access to an extensive formulary of prescription different (unduplicated) kinds of prescription drugs is essential to enabling dual eligibles partici-pating in Maryland’s OAW and LAH programs to Table 2. Top 10 Drugs Prescribed to Maryland’s remain in the community. In FY2004, prescription drug expenditures for dually eligible OAW and LAH participants totaled $13.8 million, or 91 per- Beneficiaries
cent of total prescription drug expenditures for participants in these waiver programs. More indica- tive of the importance of prescription drugs to this population is the actual quantity and variety of medications prescribed. Table 2 lists the 10 most prescribed drugs in FY2004 and how many bene- ficiaries received at least one prescription of each drug. The most widely prescribed drug among dual-eligible waiver participants was Furosemide.
This diuretic, which is used to treat hypertension, Source: UMBC analysis of Maryland Medicaid data.
a way to provide access to that drug during theappeal process or until which time the patient’sneeds can be reassessed by a Medicare-approvedphysician and alternative, formulary-approveddrugs can be prescribed? If not, community-baseddual eligibles whose drugs have not been approvedmay be at risk of medical complications and evenhospitalization or institutionalization.
Prescription Drug Distribution Channels
Under Medicare Part D, it is possible that
Medicare-approved drug plans will contract with a
more limited network of pharmacies than what is
currently available to Maryland’s dual-eligible
waiver participants. This may impede the ability of
infirm and disabled dual eligibles to continue
obtaining prescription drugs from their neighbor-
hood pharmacy. As shown in Figure 2, Maryland’s
medications. Moreover, 400 of these 1,645 med- dual-eligible waiver beneficiaries receive prescrip- ications were prescribed for one beneficiary only.
tions from a variety of outlets—chain drug stores, To ensure a smooth transition to Medicare independent drug stores, and institutional pharma- Part D prescription drug coverage, Medicare drug cies—and virtually all the pharmacies in the state plans must be prepared to offer dual eligibles a for- participate in the Medicaid program. Under a new mulary of drugs that is equivalent to the Medicaid Medicare prescription drug plan, waiver partici- formulary. The Medicare Modernization Act of pants may be forced to establish accounts with 2003 anticipates that drug plans will include the new pharmacies, possibly having to travel further use of formularies to manage drug benefits, and Medicare will establish a therapeutic classification In addition, Medicare drug plans are likely system to serve as the basis for plan formularies.
to encourage filling prescriptions by mail because The law also requires that the plan and in particu- the law allows plans lower cost-sharing for mail- lar its formulary cannot discourage enrollment of order drugs. Overreliance on mail-order for main- certain beneficiaries.5 However, the extent to tenance medications could prove problematic for which drug plan formularies will meet the needsof HCBS waiver participants remains to be seen.
Services now plans to auto-enroll dual eligibles ina drug plan by mid-December 2005. This isintended to give the Medicare drug plans leadtime to approve medications by January 1, 2006,and guarantee continuity of coverage. However,given the number of medications required bywaiver participants, will this be adequate time?What if an individual is using a drug that isexcluded from the drug plan’s formulary? Is there I m pac t of th e M e di care P re sc ri p ti on D ru g B e ne f it on H om e - and C om munity - Base d S e rvi c e s Waive r P rog ram s waiver participants. It is well documented that coordinating benefits among multiple providers Medicaid beneficiaries move frequently, are more and formularies, and negotiating timely receipt of likely to rent than own a home or apartment, and medications from diverse vendors. After the transi- oftentimes are without a permanent mailing tion to Medicare Part D, case managers will retain address. As a result, automatic monthly drug mail- responsibility for dual eligibles but no longer have ings risk not reaching the beneficiary.
access to dual eligibles’ drug records from theMedicare prescription drug provider, making it more Transportation to the Pharmacy
difficult for case managers to coordinate long-term In Maryland, Medicaid covers beneficiary trans- supports and services. All of this is likely to signifi- portation costs for nonemergency transportation to cantly increase case manager workloads, putting obtain Medicaid-covered benefits. This means that pressure on HCBS programs to reduce caseload HCBS waiver participants are currently provided ratios, which would in turn place upward pressure with transportation to the pharmacy to pick up on Medicaid payment rates for HCBS programs.
Under Medicare Part D, dual-eligible waiver Incentive Nonalignment Across Payers
participants will no longer be eligible to receive Successfully managing very sick individuals at transportation to the pharmacy because they will home or in the community as HCBS programs no longer be traveling to the drug store to obtain a strive to do requires a full complement of pre- Medicaid benefit. This may be especially problem- scription drugs. Unlike HCBS programs, however, atic for waiver participants if their Medicare drug- the Medicare program as currently structured plan-approved pharmacies are farther from home.
offers few incentives to avoid long-term institu- Consequently, waiver participants may delay pick- tionalization. Medicare pays only for short-term, ing up prescriptions until they can afford a taxi or post-hospital discharge stays in skilled nursing arrange for a ride from a family member or friend.
facilities. Private insurance, the patient’s own funds, State Medicaid programs will have the option of or Medicaid finance other long-term expenditures.
retaining the transportation benefit for dual eligi- Consequently, Medicare prescription drug plans bles, but without federal cost-sharing.
may be less inclined to approve drugs that benefi-ciaries need to remain in the community, and it is Pressure on HCBS Case Managers
possible that formularies will not even include all Case managers who arrange for and monitor ser- of the drugs that HCBS participants require. Even vices received by HCBS waiver participants in if certain drugs are included in the prescription Maryland generally do not have to coordinate drug plan’s formulary, dosage form restrictions access to prescription drugs across multiple health (e.g., a tablet versus a liquid) may limit access for plans and formularies. During the transition to HCBS beneficiaries. Moreover, in addition to pre- Medicare Part D, these Medicaid case managers will scription drugs, HCBS waiver participants typically find themselves dealing not just with Medicaid, but require a number of over-the-counter drugs, also with a number of Medicare drug plans, each which are currently covered by Medicaid. The with its own formulary, distribution channels, and new Medicare Part D prescription drug benefit cost-sharing requirements. Case managers will be does not cover over-the-counter drugs.
on the front lines, ensuring continuity of prescrip-tion drug coverage for their clients during the transition from Medicaid to Medicare. They will be Clearly, the drug formularies offered by Medicare thrust into the role of educating clients and their prescription drug plans will matter if dual eligibles caregivers about the new Medicare drug benefit, participating in HCBS waiver programs are to receive the prescription drugs they need to remain Require Medicare prescription drug plans
at home or in the community. The networks of to offer dual eligibles open formularies or
pharmacies participating in Medicare prescription Medicaid-equivalent formularies during
drug plans must be broad enough to ensure easy the first six months to a year. This would in
access to an approved pharmacy, particularly if essence lengthen the transition period for dual waiver participants are to lose their Medicaid trans- eligibles, allowing more time to consult with an portation benefit after the transition to Medicare.
in-network Medicare physician, align prescrip- HCBS case managers will require training and other tion needs, and acquire approvals under the supports to see them through the transition period.
Thereafter, caseloads will require careful monitoring Require Medicare prescription drug plans
to guard against case manager stress and overload.
to honor a beneficiary’s existing pharmacy
regimen until an in-network physician
shortcomings and administrative holdups during develops a new care plan. In effect, if
the transition period, the Centers for Medicare and Medicare is obligated to approve a beneficiary’s Medicaid Services has included in the rules for the drug regimen until the beneficiary is seen by a new Medicare law “formulary review for certain physician, the beneficiary will be insulated from diseases, medical necessity coverage of nonformu- some of the transition effects. This form of lary drugs, and plan-specific transition procedures “grandparent” protection is necessary.
to further ensure that dual-eligible beneficiarieswill get the drugs they need.”6 Allow states to pick up the cost of noncov-
But states and beneficiaries are demanding ered drugs with full federal matching funds
more. The following interim measures, together or and be eligible for a credit to the state
in part, would serve to further ease the transition “clawback.” The rules issued by the Centers for
for dual eligibles as they move from Medicaid to Medicare and Medicaid Services in January 2005 state that “states may continue to cover drugs fordual eligibles not covered by the Medicare pre- Allow states to dispense 90-day prescrip-
scription drug benefit and receive Federal Financial tions in December 2005 with full federal
Participation under Medicaid.”7 At the same time, matching funds. This would ensure that HCBS
states are required to contribute a portion of the waiver participants have the supplies they need to cost of Medicare coverage for dual eligibles accord- give them a two-month head start into 2006 and ing to a complex formula based on prior per the transition to Medicare. Because this authori- capita drug expenditures for dual eligibles (the zation would involve Medicaid expenditures for a “clawback”). The Congressional Budget Office time frame that is outside Medicaid’s responsibil- estimates that the new Medicare drug law will ity (January 2006 forward), special rules are required actually increase state Medicaid spending by $1.2 to ensure it is not considered to be fraudulent.
billion between FY2004 and FY2006, primarilydue to clawback payments.8 Without clawback Allow Medicaid to share drug information
relief, “wrap around” Medicaid drug coverage with the Medicare prescription drug plan
may be prohibitively expensive for states.
as soon as auto-enrollment is finalized.
This would allow case managers more time to
Lengthen the period for auto-enrollment.
guide dual eligibles through the transition Many states have pushed for auto-enrollment of process and help beneficiaries secure prescription dual eligibles into a Medicare prescription drug plan so that enrollment will not be dependent I m pac t of th e M e di care P re sc ri p ti on D ru g B e ne f it on H om e - and C om munity - Base d S e rvi c e s Waive r P rog ram s on action by individual beneficiaries. The final rules issued by the Centers for Medicare and Kaiser Commission on Medicaid and the Uninsured, Medicaid Services on January 21, 2005, do in “Dual Eligibles: Medicaid’s Role in Filling Medicare’s fact include auto-enrollment. Auto-enrollment is Gaps,” The Henry J. Kaiser Family Foundation, slated to begin in fall 2005, “as soon as eligible Part D plans are known,”9 and “those who do Kaiser Commission on Medicaid and the Uninsured, not sign up for a drug plan by the middle of “Dual Eligibles: Enrollment and Spending, by State, December will be auto-enrolled by Medicare.”10 2002,” The Henry J. Kaiser Family Foundation, 2005, for a benefit scheduled to begin on All states except Arizona operate 1915(c) waivers; January 1, 2006, simply does not allow enough time to ensure that all dual eligibles are enrolled Martin Kitchener, Terence Ng, Nancy Miller, andCharlene Harrington, “Medicaid Home and Moreover, for continued coverage of prescrip- Community-Based Services: National Program tion drugs, beneficiaries will have just a few Trends,” Health Affairs 24 (Jan/Feb 2005): 206–212.
short weeks to (a) see an in-network Medicare Jack Hoadley, “The Effect of Formularies and Other physician to have prescriptions written by that Cost Management Tools on Access to Medications: An in-network provider, and (b) receive prior Analysis of the MMA and Proposed Regulations.” authorization from the Medicare prescription The Henry J. Kaiser Family Foundation, September2004.
drug plan for those newly written prescriptions.
Finalizing auto-enrollment at least 60 days prior Centers for Medicare and Medicaid Services, “Final to January 1, 2006, would provide a more rea- Rules Implementing the New Medicare Law: A sonable time period for beneficiaries to com- New Prescription Drug Benefit for All MedicareBeneficiaries, Improvements to Medicare Health Plans and Establishing Options for Retirees,” Medicare Fact Sheet, January 21, 2005.
keeping very sick, frail, and disabled dual eligibles Centers for Medicare and Medicaid Services, in the community, out of nursing facilities. Many “Principal Changes in New Medicare from Proposed states have long waiting lists for these programs, as Rules to Final Rules: New Rules Establish New enrollment is limited per federal statute.Yet the lit- Prescription Drug Benefit, Improvements toMedicare Health Plans and Options for Retirees,” erature documents overwhelming evidence that Medicare Fact Sheet, January 21, 2005.
beneficiaries and their caretakers are exceedingly more satisfied with community-based care.
Congressional Budget Office, “A DetailedDescription of CBO’s Cost Estimate for the Medicare Prescription Drug Benefit,” July 2004.
smooth transition for HCBS dual eligibles from Medicaid to Medicare drug coverage are typical of Centers for Medicare and Medicaid Services, what other states will confront. The remedies sug- “Overview of the Medicare Prescription DrugBenefit: MMA Title I Summary,” January 21, 2005.
gested here should receive careful consideration bypolicymakers. Otherwise, a turbulent transition 10 Centers for Medicare and Medicaid Services, “Final stands to hurt most the very people the programs Rules Implementing the New Medicare Law: ANew Prescription Drug Benefit for All Medicare serve, compromise the ability of states to effectively Beneficiaries, Improvements to Medicare Health operate and finance HCBS programs, and tarnish Plans and Establishing Options for Retirees,” the future of public health insurance programs.
Medicare Fact Sheet, January 21, 2005.
Charles J. Milligan, Jr., J.D., M.P.H., is executive director of the Center for Health Program Develop-ment and Management at the University of Maryland, Baltimore County (UMBC). Formerly, he wasvice president of The Lewin Group and Medicaid director for the State of New Mexico. He holds alaw degree from Harvard Law School and a master of public health degree from the University ofCalifornia, Berkeley.
is a private foundation supporting independent research on health andsocial issues. The views presented here are those of the author and should not be attributed toThe Commonwealth Fund or its directors, officers, or staff.

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